Proxy adviser Institutional Shareholder Services advised Tesla shareholders to vote against Elon Musk’s proposed $1tn pay package, citing its “striking magnitude”.
ISS also said its lack of binding terms would not ensure the billionaire remains committed to the company.
“The 2025 award has an astronomical grant value conditioned upon far-reaching performance targets that, if achieved, would create enormous value for shareholders,” ISS said in a report on Friday.
“While it is recognised that the board seeks to retain Musk due to his track record and vision for Tesla’s future . . . there are unmitigated concerns surrounding the special award’s magnitude and design,” the proxy adviser added.
The report comes ahead of Tesla’s annual meeting on November 6 when shareholders will vote on the unprecedented package, which could grant Musk as much as $1tn in stock over the next decade.
Musk would receive no salary or bonus under the plan but would collect shares in instalments unlocked by increases in Tesla’s market value, combined with milestones, including a huge increase in earnings and selling millions of cars, robotaxis and artificial intelligence-powered robots.
Achieving the maximum payout of 423mn shares would be extremely challenging. Musk would have to increase adjusted earnings 24-fold to $400bn and boost Tesla’s market capitalisation to $8.5tn from $1.38tn today — almost twice that of Nvidia, currently the world’s most valuable company at $4.5tn.
“While performance targets are far-reaching, unprecedented size locks in high pay opportunities for years to come, and billions can be earned for just partial goal achievement,” ISS added.
Musk runs numerous other companies and has already amassed a $448bn fortune from his stake in Tesla and private holdings in SpaceX, xAI, Neuralink and The Boring Company.
ISS noted that “there are no prescriptive elements within the award to ensure his focus and time remain on Tesla as opposed to his other ventures, undermining the award’s primary rationale”.
The proxy recommendation is a blow to the board and its chair, Robyn Denholm, who are lobbying large shareholders to support their plan. She told the Financial Times the award was justified because Musk is a generational talent that would have to expend “time, energy and effort beyond what most humans can do”.
Last year, ISS and peer Glass Lewis also counselled investors to reject a proposal to reinstate Musk’s $56bn 2018 Tesla pay deal, which was struck down by a Delaware judge after a protracted court battle. However, Tesla won the vote anyway with more than three-quarters backing the company.
If approved, the additional shares Musk could receive would push his holdings in the electric-vehicle maker from about 16 per cent to at least 25 per cent, after taxes and dilution. The chief executive has said that he may leave Tesla if he does not gain greater control, arguing that he needs to protect the company from activists or a hostile takeover as it develops powerful AI technology and humanoid robots.
A spokesperson for Tesla did not immediately respond to a request for comment.
ISS said Tesla’s corporate governance committee chair Ira Ehrenpreis should not be reelected to the board after “unilaterally” adopting a bylaw that “materially restricts shareholders’ litigation rights”.
However, the adviser said two other directors, Kathleen Wilson-Thompson and Joe Gebbia, should be backed.
